A recent Scottish law case has highlighted the need to check the ‘standard terms’ used in commercial or consumer transactions as you may find clauses specifying that only an English court can determine any legal issues with the deal.

Let’s suppose that you do a commercial or consumer transaction in Scotland with a business or individual that is based in Scotland. And that you are based in Scotland too.

In the event of litigation, you would naturally assume the case would go to a Scottish court. Correct?

Not necessarily.

For hidden away in the ‘standard terms’ of the transaction may be some surprises.

A recent Scottish case illustrates the pitfalls of failing to check the standard terms, and highlights the importance of understanding applicable law and jurisdiction clauses.

The case involved Bank of Ireland (UK) and Knight Frank LLP.

The Bank raised an action claiming that a report prepared by the surveyor had substantially overstated the value of a property. The Bank’s case was that the surveyor had been negligent.

The surveyor was based in Scotland, the Bank branch involved was in Scotland, and the property was in Scotland.

Everything about the case seemed to be Scottish, so the Bank took the case to a Scottish court.

But the surveyor, as part of its defence, claimed that the Bank could not pursue its claim in a Scottish court.

This was because the surveyor’s ‘standard terms’ stated that disputes had to come before an English court.

In a 12-year period leading up to the case, the surveyor told the court, it had contracted with the Bank over 400 times, using the ‘standard terms’.

In the transaction in question, according to the defence, the Bank instructed the report but neither read or acknowledged the standard terms that were sent alongside it. As a lawyer, I’d have to say this is not to be recommended! But, in real life it’s all too common.

The Judge decided that the Bank was not entitled to accept the survey report but to reject what the ‘standard terms’ said.

The ‘standard terms’ therefore applied, and the dispute had to be dealt with by an English court.

The Scottish court had no jurisdiction and the Bank’s case against the surveyor failed.

Nobody even knows if there was a good case for negligence or not.

I’ve pared down the story and kept the legal detail to a minimum, but the case highlights the pitfalls of English / Scottish jurisdiction clauses, and the consequences and expense they can bring for both businesses or individuals.

Even in cases that appear to be straightforwardly ‘Scottish’ or ‘English’.

Scottish courts can sometimes hear cases that are subject to English law, but they cannot hear cases when the ‘standard terms’ say only English courts can rule on disputes.

Finding this out too late can cause great angst and wasted expense.

So, pay attention to the ‘standard terms’, don’t make assumptions about what law will apply, and do take advice.